Lemonade CEO Calls 2023 ‘The Year When the Plan Came Together’ *Centurion Insurance AFS*

Insurtech Lemonade reported a fourth quarter 2023 net loss of $42.4 million and a net loss of about $237 million for the full year but its chief executive said the company has seen “dramatic progress.”

Results were in comparison to net losses of about $64 million and $$298 million the prior year.

Chief Executive and co-founder Daniel Schreiber said during a recent call with analysts that other metrics from 2023’s last quarter, such as a 20% growth in in-force premiums to $747 million and an improved gross loss ratio to 77 (compared to 89 in 2022), made 2023 “the year when the plan came together.”

“Underpinning our results was a steady stream of improvements in our ability to match rate to risk as well as in our operational efficiencies—all these mediated by a singular integrated system that improves and is improved by all our customer interaction,” said Schreiber of the artificial intelligence-powered provider of homeowners, auto, renters, pet, and life insurance.

Lemonade has “transitioned from being a hypothesis to being more evidence-based,” the CEO added. “This isn’t a ‘mission accomplished’ moment, but the progress in 2023 was tangible and material, and it increases our confidence that we’re on track not only to turn cash flow positive next year with plenty of cash in the bank, but to build a large, enduring and profitable business thereafter.”

Related: Lemonade Expects to Be in the Black Within Three Years

Co-founder and President Shai Wininger said Lemonade in 2023 “intentionally slowed growth” in areas were price did not exceed losses and the company’s progress on rate adequacy is not done. It awaits “significant further rate approvals,” Wininger added, and Lemonade in 2024 will continue to limit the sale of home and auto products.

“That said, the tide has definitely turned.” Wininger said. “We are seeing more and more opportunities for profitable growth across our portfolio.”

With that news, Wininger told analysts Lemonade plans to double its marketing spend in 2024 with the outlook Lemonade will “generate about a 3-times return on the additional $55 million planned for marketing this year.” This will boost the company’s EBITDA over time but “will be a drag on it in 2024,” he added.

Lemonade’s adjusted EBITDA for the fourth quarter 2023 and full year was a net loss of about $29 million and a net loss of about $173 million compared to net losses of $52 million and $225 million in 2022, respectively. In Lemonade’s financial reports, adjusted EBITDA is net earnings/losses before interest, taxes, depreciation, and amortization adjusted for a few other items—the most significant of which is stock-based compensation expense.

Schreiber said auto accounts for about 15% of total IFP now and will likely stay that way in 2024. He said Lemonade has plans for “several exciting technology advancements that should help with cross-selling,” and with further refinement of its telemetry and data science, accelerated growth in auto can be expected in 2025.

On employee headcount, Schreiber said Lemonade is “pretty much staffed to the levels that we see ourselves needing” in teams like engineering, financing, and marketing. “We could double and triple and perhaps even 10x our business without seeing any significant growth in those teams,” he said. Customer-facing teams could grow as the customer count grows.